There is a saying in the world of business that by the time an opportunity is visible to the general public it’s already past its prime.
Well, here’s one area that’s still in its infancy and worth investing in – procurement tech.
For investors keen to enter the market before it’s saturated now is a great time to do so.
Key Takeaway Points
- In spite of the coronavirus pandemic tech IPOs broke records in 2020 and bigger IPOs are anticipated in 2021.
- The growth of the procurement tech industry is on an uphill trajectory given the widescale adoption of technology along the supply chain.
- Furthermore, procurement tech M&As are gaining traction on a global scale
Studying the growth history of businesses is central when researching new investment opportunities.
We took some time to study the procurement industry, some of the best exit deals of the last decade, and present to you, our findings.
In a nutshell, we observed that investors are moving in fast as they’ve seen the potential procurement tech heralds.
But before we unravel all our findings, let’s go right to the beginning and define procurement tech.
What is Procurement Tech?
According to the Chartered Institute of Procurement and Supply (CIPS), the definition for procurement technology is:
“Integrated set of systems collecting, storing, and processing data to provide information, knowledge, and analysis to support performance management and decision making.”
Put another way, procurement tech refers to any and all software and systems that organizations can use to streamline operations and improve service delivery within the supply chain.
What’s fascinating about the procurement industry are the various moving parts that have led to different tech cluster solutions. Because it’s rare to find a single procurement software offering an all-in-one procurement solution, you’re going to come across several procurement technologies during your research phase.
This leads us to the various types of procurement technologies investors can invest in.
The 5 Types of Procurement Tech to Invest in Today
Strategic Sourcing Solutions
Sourcing is an integral part of the entire procurement process and one that arguably deserves its own software. From assisting in discovering, evaluating, and ranking potential vendors, strategic sourcing technology makes it easier to connect with suppliers even those on the other side of the world.
Procure-to-Pay Solutions
This type of procurement solution comes close to being a full gamut as it covers the majority of processes that are involved in the procurement process. This type of technology makes a formidable investment as most companies are all too happy to invest in a single solution instead of several individual integrations that can fit into their ERP.
Team Collaboration Solutions
Endless email loop chains are the bane of every procurement department. Couple this with a lack of visibility and teamwork becomes a nightmare. This is one of the reasons task management procurement tech solutions were developed.
Supplier Relationship Management (SRM) Solutions
Undoubtedly one of the biggest aspects of procurement is supplier relationship management. Recognizing this niche and the gap in the market, developers designed SRM procurement tech solutions to satisfy the need. And needless to say, the opportunity that lies in investing in this particular technology is colossal.
e-Procurement Solutions
These procurement tech solutions have taken the traditional procurement processes and digitalized them. Think about auctions, tendering, and issuing of requests. All of this can now be done through various e-procurement software.
What Makes Procurement Tech an Attractive Investment?
Perhaps you’re still unsure about why exactly you should invest in procurement tech. Well, here are three reasons.
1. Impressive Exits and Well-Financed Seeding Rounds
If the previous exits are anything to go by then there is a strong case to be made for investing in procurement technology.
SAP’s $4.3 billion acquisition of Ariba back in 2012 set the bar quite high for future procurement tech acquisitions.
Even for companies that aren’t seeking an acquisition but just additional funding, investors seem all too ready and willing to part with their money. A good example is Tradeshift that managed to secure $250 million in a Series E VC funding campaign in 2020.
2. Strategic Relevance and Favorable ROI
Every business relies on procurement in some form or another. Procurement technologies are very obscure but help to drive companies and improve their operational efficiencies.
They are strategic in relevance and have shown to deliver a favorable ROI over the years. And with Chief Procurement Officers eager to see greater digitalization, investors can be sure procurement tech startups will soon experience a boom.
For further reading here are 4 Key Procurement Technology Trends to Watch Out For in 2021.
3. Lucrative Potential and Returns
The honest truth of the matter is that procurement tech is still a largely untapped market. It’s not yet saturated meaning the potential is massive.
As more companies, corporations, and enterprises integrate procurement solutions in their ERPs, we’re going to see a disruption in how procurement is done on every scale.
For the investor willing to take a risk now, the anticipated returns will one day prove to have been well worth the effort.
Conclusion
Procurement tech has simplified life for all involved in the procurement process no doubt.
Such technologies have made it easier to source the best deals even halfway across the world, process payments faster, and engage vendors in e-auctions remotely.
Thanks to software from procurement companies like ProcurePort, better sourcing decisions are now possible.
Equip your team with optimum procurement technology including spend analysis software, procure-to-pay solutions, contract management solutions, purchase requisition software, and RFP RFI RFQ solutions.
Here’s a resource to get you started off on the right foot: A Vendor Management Guide for Procurement Leaders
Alternatively, to discuss your enterprise needs with a consultant or to schedule a demo of our suite of procurement solutions contact us today.